Correlation Between Public Service and WEC Energy

Can any of the company-specific risk be diversified away by investing in both Public Service and WEC Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Public Service and WEC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Public Service Enterprise and WEC Energy Group, you can compare the effects of market volatilities on Public Service and WEC Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Public Service with a short position of WEC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Public Service and WEC Energy.

Diversification Opportunities for Public Service and WEC Energy

-0.57

Correlation Coefficient

Public Service  WEC Energy

Excellent diversification

The 3 months correlation between Public and WEC is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Public Service Enterprise and WEC Energy Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WEC Energy Group and Public Service is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Public Service Enterprise are associated (or correlated) with WEC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WEC Energy Group has no effect on the direction of Public Service i.e., Public Service and WEC Energy go up and down completely randomly.

Pair Corralation between Public Service and WEC Energy

Considering the 90-day investment horizon Public Service Enterprise is expected to under-perform the WEC Energy. In addition to that, Public Service is 1.16 times more volatile than WEC Energy Group. It trades about -0.03 of its total potential returns per unit of risk. WEC Energy Group is currently generating about 0.14 per unit of volatility. If you would invest  9,400  in WEC Energy Group on December 27, 2024 and sell it today you would earn a total of  1,031  from holding WEC Energy Group or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Public Service Enterprise  vs.  WEC Energy Group

Public Service Enterprise

Risk-Adjusted Performance

Very Weak

Over the last 90 days Public Service Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Public Service is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

WEC Energy Group

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WEC Energy Group are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, WEC Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Public Service and WEC Energy

The main advantage of trading using opposite Public Service and WEC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Public Service position performs unexpectedly, WEC Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WEC Energy will offset losses from the drop in WEC Energy's long position.

The idea behind Public Service Enterprise and WEC Energy Group pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.